Morning Report: USD Remains Pressured On Positioning Ahead Of FOMC

Market Commentary  

The USD remained generally bearish overnight after poor equities performance led by China as shares plunge resulting in continued unwinding of EUR ­funded carry trades with EURUSD and euro crosses higher given the risk ­off sentiment. Given some temporary relief in the equities market and no major Eurozone data, EURUSD enters consolidation mode this morning with 1.1050 providing the key support level.  As volatility pricing creeps higher, expect choppy price action as traders look for Fed clarity on September rate hike from tomorrows FOMC statement.

Given the absence of any data in the overnight Asian session, focus has been on domestic and regional equity performance as well as month end related operations. Interbank flow profiles over last night’s sell off towards 123.00 saw good demand from fast and real money accounts, a testament to a call for further range ­trading ahead of the FOMC. This morning saw an early push at the lows again as equities gap lower in the red, but a subsequent recovery in Chinese stocks from the lows triggered a healthy dose of short covering in bearish cross JPY positions.

GBPUSD was back above 1.5500 yesterday, but dropped to 1.5489 low on weaker CBI trends orders, then the pair gradually grinded higher to 1.5594 against a broadly weaker dollar. GBP Q2 GDP release will be the focus in today’s session, market is anticipating strength especially after hawkish comments from the BOE.

Technical  Commentary 

EURUSD Short Term (1-3 Days): Bullish  – Medium Term (1-3 Weeks) Bearish

  • Rejected at initial test 1.1140/60 resistance a loss of 1.0960/40 would concern near term bullish bias. While 1.1030/50 supports intraday downside expect test of 1.12 next.
  • Daily Order Flow bullish; OBV sideways to down, Linear Regression and Psychology bullish but lack momentum
  • Monitoring intraday price and Order Flow indicators on a test of 1.12 or 1.08

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GBPUSD: Short Term (1-3 Days): Bullish  – Medium Term (1-3 Weeks) Bearish

  • Third attempt to regain 1.57 fails, a sustained break and close below 1.55  would suggest bearish symmetry target at 1.5285 remains in play a close above 1.57 negates near term bearishness.
  • Daily Order Flow bullish; OBV sideways to up, Linear Regression and Psychology rotate around midpoints
  • Monitoring intraday price action and Order Flow indicators on a test of 1.5285 or 1.5750

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USDJPY: Short Term (1-3 Days): Bearish  – Medium Term (1-3 Weeks) Bullish

  • Bulls target 125.85 and 128 in extension, expect intraday downside reactions to be supported towards 123 only a failure at pivotal 122.50 concerns medium term bullish view, failure here opens 120 in retest of ascending triangle trend line.
  • Daily Order Flow bearish; OBV sideways, Linear Regression and Psychology pierce midpoints from above.but lack downside momentum
  • Monitoring intraday price action and Order Flow indicators on a test of 128 or 122.50

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EURJPY: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bearish

  • 133/34 range support continues to hold and price erodes near term trendline resistance this break suggest a retest of 138, advance above here opens 143.
  • Daily Order Flow bullish; OBV sideways, Linear Regression supported at midpoint, Psychology pierce midpoints from above
  • Monitoring intraday price action and Order Flow indicators at 138 and 133

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